BOFIT Viikkokatsaus / BOFIT Weekly 2018/49

The Argentina G20 summit produced a fairly thin final communiqué in which the member states committed to necessary reforms of the WTO to improve its operation. China’s development and its economic policy practices are behind developed-economy calls for WTO reform.

The United States has been the sharpest critic of the WTO and China’s exploitation of the system. A good sign is that the US now promises to continue discussions on trade policy on a multilateral basis. As regards China’s commitment to WTO reforms, it is important that China itself participates in determining the rules-based international trading order. However, it will be very difficult to find a common premise for reform, given that member views on the matter are so divergent with to the substance of reform. No concrete initiatives on WTO reforms were announced in Buenos Aires.

The biggest challenge to WTO reform from the Chinese standpoint involves Western demands for elimination of public subsidies and other market-distorting practices. These are particularly sensitive issues for China and other emerging economies. As one of the world’s trading superpowers, China can no longer hide behind its developing economy status and demand special treatment or concessions.

The WTO and the multilateral trade policy system are facing their deepest crisis in decades. The US-China trade disputes are at the centre of current problems. How the US and China succeed in their bilateral talks during the next three months may also indicate whether reforms of the WTO are possible at all or whether the crisis around it deepens further.